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Month: November 2017

For those who have any doubt about my claims on both how adulterated these “markets” are, along with how important passing a meaningful tax reform bill is. I’ll let the following chart speak for itself. To wit:

The above is the S&P 500™ before the “market” open today via 15min intervals. I’ve made a few notations that should provoke some introspective reasoning on where we are, and how precarious we sit.

As always, don’t take my words for anything. Look at the above and come to your own, because those are truly the only ones that matter.

The only thing more troubling about what the above represents, is the shoulders it would seem this entire house-of-cards now rests upon. As I stated yesterday there were already 2 openly declared No votes for the bill in its current form. It would take only 1 more to send it into the waste can. There are now 6 openly opposed, but yet not openly stated as a No. The issue?

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I just received a call from a colleague asking me for a few thoughts, once we ended, I thought I’d share a few responses (actually one) to their inevitable inquiry of, “…and what are your thoughts on this current market hitting all time highs, again?”

Here is a summary of my response for anyone wanting to know…

In a nutshell we could be reaching that moment of time where everything lines in ways where the dominoes, if you will, are all lined up and all it takes is just the slightest movement, at the right place, and at the wrong time, that puts the inevitable “domino effect” into motion.

You can use other analogies like, “The perfect storm”, “The butterfly effect”, et cetera. But what I believe is this: Currently, they all fit.

Use whatever one you like, but this may be that moment in time where these types of analogies to instill caution have their genesis. Again, doesn’t mean it’s an inevitability. The warning, if you will, is for making sure one applies the watchful eye for further signs as to act appropriately, should they appear. So with that said, here’s what I’m alluding to…

The current timing and “market” moves are important for this reason: Is this all – end of the month window dressing; bolstered via near guarantee of no Fed, action for at least a few more weeks; buttressed by the tax bill possibly being voted on before that end ensuring an assumed (that is if it passes) significant “pop” even higher?

The flip side: And what happens if by late Wednesday or Thursday the “tax bill” much like the healthcare debacle is rendered D.O.A? Will there be a mad dash to “sell everything” to lock in gains for both the end-of-month, and quite possibly the year? And if so? Does it cascade into December 1 on Friday?

These can only be answered hypothetically and under the veil using the technical term of “wild-ass-guesses.”

No one knows, however, one needs to think about it, because what is beyond questioning is this: We. Are. Here. And precisely at this confluence of possibilities, as in: Either we “dodge-the-bullet.” Or, the light of what seemed was at the end of the proverbial tunnel is actually a bullet-train and the “market” is straddled across the track doing its best imitation of a deer stuck in the headlights.

Personally, with the hype I see taking place around such things as Bitcoin™, apps for “set it and forget it” investing, and a “market” still under the illusion that the BTFD investing strategy can not fail, has taken on a real posture of surrealism when looking at it from afar, with any objective reasoning. It’s as if 2007/08 never did happen, yet worse, as thinking now goes, “Never will.”

This is (again, all opinion) that moment in time which: It is – what it is – till it isn’t.

And that “isn’t” already has 2 No votes openly declared against it, with another 6 openly opposed, but yet not officially declared as a: No.

Just one more, and this tax bill isn’t going to see the light out of committee, let alone day. And that isn’t what this market expects. And then it will be a mad rush to figure out what to do with the meaning of “is” rather than “isn’t.” As in: The final straw of the hopium trifecta aka “The Trump Trade, e.g., Any – true healthcare reform, true regulatory reform, true tax reform passed and signed before year-end goes from isn’t DOA. To is.

And that’s when the definition of “is” becomes very relevant indeed.

As always, we shall see. But the length of time for that vision, I’m afraid, is not over the proverbial horizon. But rather…

In days of yore (i.e., 2008 BQE) businesses actually had to survive by selling products and services at a price that was more than they cost to produce, as to cover all other ancillary expenses. (I know, heresy, but stay with me.) If they didn’t? They weren’t called a business, they were called a charity.

If they did so manage to do this (i.e. continually, unabated, always replenishing ) for any length of time. Usually, the authorities from any number of agencies (think IRS, FBI, et al) would be knocking on the doors demanding to see the books. For the only way something like that could be taking place usually involved either, “dirty laundry” or someone with a name ending in Ponzi.

Today? It’s just called speculative “investing” or, “Angel” or, “Series A,B,C,” – LMNOP fund-raising. Bernie Madoff must be sitting in his cell wondering, “And just what am I in here for, precisely?”

Since I just brought up Bernie, let me give you what I call a “fun fact” to ponder. Ready?

If Madoff’s “cash burn” had allowed him to survive for about another 18/24 months, or so. (he was arrested in Dec. 2008) He would have been able to not only cover his problematic “cash burn.” But with the help from Mr. “The Courage To Print” Ben Bernanke, he would probably be hailed today as one of the greatest investors of all time. For his so-called “stated” returns would now be inline with what was truly transpiring in the “markets.” i.e., Never a down draft, and consistent double-digit gains for years. And no one would be the wiser, or at least, would care about how he did it. Think about it. But I digress.

Cash-burn since the development and implementation of QE (quantitative easing) and all its corollaries, has morphed from something to be concerned with (i.e., it usually signaled how many days were left before bankruptcy) to now it’s been deemed as something akin to: “No big deal, who cares, sell more Series ____(fill in the blank.) And while you’re at it, structure it so it raises the valuation a few more $Billion. I’m looking at getting a new yacht after this thing IPO’s and I want a big one, with a submarine, helicopter and such, like that Russian dude’s got. Oh, and what’s a ‘trep’ got to do to get a gluten-free-latte around here?”

But that was then, and this is now, and let’s just say, “it’s different this time.”

Just before the holiday Elon Musk took to the stage, once again, to unleash his next creation, in P.T. Barnum fashion, that I deemed “Future Hype.” To be fair, I’m a fan of Mr. Musk and his chutzpah when it comes to big thinking ideas. What I’m speaking directly to here is business, and the models for conducting it.

It is here where “big ideas” have performed what can only be called “magical thinking” alchemy. i.e., The Model S, X, and 3 may be wonderful vehicles, but the business model to produce them are anything but. And it seems Mr. Musk needs to now focus as much time and energy producing future-hype scenarios (think range and power still not developed) to sell the idea to any and all investors, just as much, if not more so, than trying to produce already “sold” production commitments.

Suddenly “Cash Burn” is becoming a hot topic. I was surprised (actually very) to read two very provoking pieces in regards to Tesla™ over the last few days. First, there’s the outright questioning of battery claims. But what caught my attention was the second, which almost in the same breath, suddenly questions Tesla’s survivability claims based on current (wait for it…)cash-burn projections.

Do you, or can you dear reader, remember a time before this year when business metrics, of any type, where the two words “cash burn” were included or even questioned? Let alone, actually laid out prompting that “concern” might be a reasonable conclusion going forward anywhere in the mainstream business/financial media? Again – anywhere?

It would appear the worm-has-turned (or turning) in the “it’s different this time” bottle of magical business alchemy, yes?

Suddenly Mr. Musk’s claims, rationales, or responses to anything regarding his entire business structure are now open game for in-depth questioning and testing of metrics where 2+2=4 math applies. This alone should be concerning for any and all BTFD devotees, regardless if one is an investor in Tesla, or just the broader “markets.”

The reasoning? Just look at a current snap-shot regarding the big-picture, if you will. Where future-hype had once reined supreme. Here’s an example, for if a picture tells a thousand words, than a chart can portend $Billions of reasons for concern. To wit:

The above is a chart showing Tesla on the left and the NASDAQ 100™ on the right, via daily intervals. Notice anything? That’s right, suddenly, as sung by Sesame Street®, “One of these things is not like the other…”

The time frames are the same, but no longer is their BTFD trajectory in lock-step, as they once were. Today, that “trajectory” seems to be stunted as further questioning of prior claims, promises, and future-hype takes its toll on questioning “investors.” Unlike the Nasdaq which still (at least for the time being) has its BTFD mojo propellant working in the unquestioning vacuum of central bank hopium.

So here’s where things get interesting from a cash-burn prospective. How, you say? Good question, and it is this: If, Tesla the stock just hovers in its current location, what are the ramifications (again, if any for it’s all conjecture) if we suddenly have some form of a pull back, or heaven forbid, bonafide correction within the very near future?

Again, if the indexes such as the Nasdaq and others, which have been impervious to any and all bad news, whiffs of impending Armageddon, European sovereign risks, Middle East turmoil, just to name a few: What happens to not just a cash-burn dependent company such as Tesla? But rather, the entire complex?

What complex is that? Once again, great question, did I mention unicorns yet? Let’s do that now, shall we?

I’m only going to use one for this example, not to pick on them, but I really feel there is no other mascot of the current unicorn debacle that sums up everything facing it. Of course I’m speaking of Uber™.

And here again is where “it’s different this time” thinking has turned in Judas fashion against the once claims and models for valuation, and business domination.

Over the last year, or so, there have been more negative stories in regards to Uber than positive. This once Wall Street darling has gone from championed mythical creature sporting a “horn made of gold” – to having its head removed in full public view, then allowed to be seen via that same public reminiscent of the old joke of “letting it run around with its head removed as it continued to spurt “cash.” (i.e., Remember the initial and unfolding debacle with its CEO’s ousting and its fallout, all while it was publicly reported on, and playing out with, its Board and current investors?)

And then, suddenly, like a bolt-of-lightning from beyond, cash-burn questions began, and are becoming the norm, when any discussion about them arrises. Talk about its different this time!

The problem here for Uber (and all its stable mates, I’ll contend) is it faces the same abnormality as does Tesla. For it would seem the old “play book” is no longer working. Because, if the underlying cash-burn issues it has will not go away, nor, at the least be turned a blind-eye as was prior? Are you beginning to see my point?

Again, if the “market” as much as hiccups in the very near future: Will the putting of money in the line of fire of further cash-burn, with no end in sight, be the first place scared money goes? Or, the last? And if it’s the latter?

Add to this this almost forgotten item: If the Fed. does indeed raise in a few weeks, and the budget debacle begins simultaneously, along with the possibility of a failed meaningful tax bill by year-end?

Can you say, “It’s different this time?” The reasoning? These business models needed to produce, or reduce the concern of cash-burn, stat. And not only does that not appear to be happening within these once “darlings”, but rather, they’re disappearing along with ever-the-more “cash” at an alarming rate and scale.

Uber it seems is losing more territory than its gaining, the latest is London. But what’s more concerning is the loss of its perceived credibility for forging a more disciplined path forward. And it’s here where things might go awry in a manner and form once vigorously outmaneuvered or outright disregarded.

Here I’m speaking to the revelation that Uber not only had a data breach, but paid to cover it up, and the new CEO, the new supposed “adult in the room” reportedly also knew, months in advance.

Can you say, “Oh, oh?”

The issue again here is this: The future-hype playbook is no longer effective as it once was. But it’s not for a lack of trying, I’ll contend.

The media was all abuzz about 6 days ago (remember this time line) with the proclamation that Uber entered into an agreement with Volvo™ to purchase up to 24,000 self driving vehicles. Sounds just “fantastic!”, right? What you may not of heard about (unless you’re truly paying attention) is that about 5 days ago Colorado fined Uber $8.9 Million for driver issues. Funny how that driver issue thingy came only a day after the hoopla of setting the stage for not needing drivers at all. Can you say “future-hype?” But that’s just me, I guess.

However, this data breach debacle may be the very issue that any type of “hype” future, or not, may not quell. For if there’s one thing governments and politicians, of all types, whether it be in certain locales, nations, or otherwise. There’s one thing they all have in common and will agree on – if there’s an issue to place their bullseye on when it comes to their fund-raising. Let’s just say, laser-focus and pit-bull-jaws immediately come to mind.

And this (e.g., data breach) is just the sort of issue that allows politicians to decry for justice, and the extraction of large quantities of cash-burn resources, out of “their public duty and concern for constituent, or consumer protection!”

It would be somewhat ironic if it was a government regulatory issue that causes Uber the most distress at this point in its life, since it has openly made a mockery of how it both felt, dealt with, as well as adhered, to any so-called rules, regulations, or business ethics since it began.

And make no mistake: “Cover up”, and “data breach” are two terms no company wants any politician to be both able too say, let alone prove it’s correct, in today’s current political environment. Hint: See Equifax™, or even Wells Fargo™ for clues.

You think any of this “future-hype” along with “cover-up” has anything to do with keeping any Softbank™ hope of investing further cash burn fuel alive?

And if it didn’t, or doesn’t?

Heads will roll, again, for any and all “it’s different this time” believers, showered in the electric sparks from a crashing “its different this time” reality.

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In Septemer of 2014 I dared not only speak the unthinkable, but to the howls and screams of next-in-rotation fund mangers, Silicon Valley aficionados, mainstream financial/business media outlets et al, I dared stand behind my reasoning too this day. And yes, even in the face of an unrelenting melt-up.

The issue that is now quite apparent in retrospect, yet still unspoken by most, has been that it has been my observations that have not only come to fruition, but are becoming increasingly hard to miss even for those trying. Here’s an example. To wit:

Come this October the Federal Reserve will make its final tranche of QE available. The amount assumed by many is that it will be 50% larger than what we’ve seen over these last years. ($15 Billion as opposed to $10)

One may see an increased flurry of buying into anything and everything that has even the slightest possibility of making a profit. Or, what Wall Street cares about even more; a growth story that can be perpetuated via financial engineering that sticks during earnings seasons.

But, one shouldn’t read into this as “confirmation” the risk appetite story is not only alive but growing. For that is all about to change.

Once the Fed shuts down the section of QE that has been pumping Billions upon Billions of dollars every month – it’s over for a great many of today’s Wall Street darlings.

The above, at that time, was seen as not only blasphemy, but was met with screams, howls, gnashing of teeth, and more. And that’s just from the business/financial media. When it came to next-in-rotation fund-managers or VC’s? Let’s just say, I’ll keep that dialogue from the view of polite minded eyes.

So why is the above relevant today one might ask? Fair point, and it is this…

Just as this was seen as the first “shot” in the war across the entire “It’s different this time” defensive mindset. It seems that the end to this foolish war against any-and-all fundamental business reasoning (as in making a net profit, for one) may be drawing closer to a close. What do I have to offer as evidence one might ask? Good question, and it is this, again, to wit:

“The social media boom, powered by the growth of mobile computing, is over. And while a glittering new technological age of artificial intelligence beckons, the current cycle seems bloated and fatigued. It’s no wonder venture capitalists are looking elsewhere.”

All I’ll say is this: Much like when Pres. Johnson was claimed after watching Walter Cronkite deliver a thought provoking editorial against the mindset for continuing the Vietnam debacle, where he supposedly lamented, saying, “If I’ve lost Cronkite…” signaling he had lost support. In keeping with that theme, because I believe it fits…

If Silicon Valley has lost Vanity Fair?

And if you don’t think being on magazine covers, or having glossy photo shoots of Silicon Valley “stars” was important to those seemingly more addicted to fame than their business models, may I remind you here, here, and here.

Footnote: These “FTWSIJDGIGT” articles came into being when many of the topics I had opined on over the years were being openly criticized for “having no clue”. Yet, over the years these insights came back around showing maybe I knew a little bit more than some were giving me credit for. It was my way of tongue-in-cheek as to not use the old “I told you so” analogy. I’m saying this purely for the benefit of those who may be new or reading here for the first time (and there are a great many of you and thank you too all). I never wanted or want to seem like I’m doing the “Nah, nah, nah, nah, nah” type of response to my detractors. I’d rather let the chips fall – good or bad – and let readers decide the credibility of either side. Occasionally however, there are, and have been times they do need to be pointed out which is why these now have taken on a life of their own. (i.e., something of significance per se that may have a direct impact on one’s business etc., etc.) And readers, colleagues, and others have requested their continuance.

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From my family to yours, have a wonderful Thanksgiving holiday for those celebrating in the U.S.

On an another note, may I say thank you to every one of you that have found any of my work, of any interest over these years across the globe wherever you may be. And yes, this includes any detractors as well. Again, thank you.

Mark

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I consistently mention China and the trouble that it could unleash across the global “markets.” The reason being, should there be any misgivings in regard to how the politburo handles its ever evolving, ever-growing shadow banking and finance schemes the ensuing fallout could be, for lack of a better word, let’s just say, epic.(i.e., Much I like I warned throughout 2014 which culminated with China turmoil resulting in bringing all three U.S. futures markets to go “lock limit down” in 2015)

The reasoning is simple: There are literally magnitudes higher of potential volatility, as well as potentially destructive chaos with global implications, than what initiated the first chain reaction for financial mass destruction in 2007-08 that begat what we now know as the Great Financial Crisis. And no, I’m not trying to be hyperbolic.

In other words, China’s potential for financial meltdown is not only, by far, more disruptive. But (and it’s a very big but) it is also far more volatile and currently so. The only reason why there is any semblance of “control” now taking place is, because the politburo will either, 1) Not let it be reported. And, 2) Desperately change rules or laws, on the fly, to quell any panic. And if that doesn’t work? Arrest and detain anyone they feel may say anything other than “Things are just ducky!”

The latest example of this was on display right before, as well as during, the most recent conclave of China’s Party Congress. i.e., Any and all bad or concerning news about any and all business reporting was not allowed by decree. That’s what doing business in a communist regime is truly like.

Logically, that would also imply, or one could infer, that there’s a flip side, as in: All, or any “good news” would be deemed “just fantastic!” and would be unleashed into the Chinese markets with a furor to celebrate the now written into the Chinese rolls: President Xi Jinping. Cementing both his place in history, as well as what he supposedly now represents (i.e., China’s business and economic wealth and stronghold on the global stage) into China’s history books for the ages.

The result? I’ve mentioned it many times over the last few weeks with one expression that seems to fit. e.g., (cough cough Hang Seng cough cough.)

But today I would like to leave you with a “picture” as they say in Silicon Valley, aka a chart. To wit:

The above is a chart representing the Hang Seng index (The Chinese equivalent of the U.S. Dow) using daily intervals. There’s a lot of worthy warning signs within this chart via a technical analysis viewpoint. But for right now I have highlighted one that has really caught my eye in conjunction with the further, recent events within China, as well as abroad.

Just as I have highlighted similar things concerning U.S. indexes, this one, has the potential for creating far more seismic waves than most others combined. Hint: Here’s just one quick reminder back only in 2016 of just how fast things can change in China for those suffering any memory loss.

With the U.S. “markets” already operating in holiday mode, any overnight disruption in China’s markets, along with what may be brewing in unison in Europe, it all feels like a tinder-box in search of a match. All I’m saying in regards to all this, is this: This is one of those periods, once again, that all eyes should be where it seems the mainstream financial/business media cares not to even recognize, let alone look.

As I always say, “If you’re in business, you can’t afford not to. Period.” Because remember…

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As I myself have said, ad nauseam, the moment one tries to elaborate on why caution should be paramount when it pertains to these “markets.” It is those very “markets” that seem to look over their shoulder and simultaneously flip-a-finger to anyone daring to question their ascending route. Today, once again, is no different.

As of this writing at approximately 2:00pm ET the “markets” have vaulted, once again, beyond the stratosphere and into black-sky territory once again. Clearly the catalyst for this must be something so news worthy that the mainstream financial/business media would be lit up, so brightly, it would make current holiday decorations jealous. Hint: I’ll save you the time, there isn’t any. And I mean just that – anything!

Did in the overnight Tax cuts pass, or a healthcare reform bill get banged out? How about a flying car? Surely there must have been a flying car in all of this, right? Nope, nope, and nope. Sorry. But there was one thing that should give anyone trying to pay attention pause, if their truly trying to do just that. And it is this. To wit:

Above is a chart representing both the cross rate of the $Dollar and Chinese Yuan (the first on left) and both the Hang Seng Futures (middle) as well as the Hang Sang normal hours (far right). All are represented via 1Hr intervals. See those spikes? Those “spikes” are the equivalent of what I’ve half jokingly described using the analogy from Star Wars® when the Death-Star destroyed Alderaan. e.g., “…as if million of voices cried out in terror, and were suddenly silenced.”

These are the types of moves that are deadly to those with any resting orders, especially short sellers. Whether it’s an orchestrated “hunt and destroy” algo-program, or just an HFT algo gone wild. Doesn’t matter. For what it portends, usually, is not good for those that only believe in the BTFD investment bromide.

As many will sit around the table this week with family and guests. One can imagine that the topic of “Look at that market, ain’t it great!” will come up. When it does, as one listens to the reasons of why, that will surely follow the hyperbole near verbatim that one hears strewn across the mainstream media. I offer up just this one tidbit extra to chew on…

China is not Vegas – and what happens there – gets heard, seen, and felt exponentially so, here. And quick.

Just like turkeys: money, when it’s scared – will run to whatever door it perceives as “safe.”

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To say that we are living through precarious times seems to be an understatement. Whether one lives in the so moniker’d “developed world, emerging, or frontier” there seems to be one constant currently: No one seems to be able to accurately ponder what tomorrow may bring, whether its political, economical, social, or combination there of.

The only thing constant right now is one of two things: Either, further instability is on the horizon. Or, complete and utter chaos is already knocking on the door. (See Kim Jong-un or Robert Mugabe for clues.)

Stability, the once deemed word for progress throughout civilized society now seems, to have devolved to mean, at what point of the instability around them they’re currently coping with. i.e., If you’re currently muddling through economically while dodging being a statistic, as the term goes, that currently means you, or your situation, is currently “stable.”

This now applies to not only people, but business, as well as politics worldwide. If you think I’m exaggerating? Hint: Hollywood. Need I say more?

However, there has been one outlier, for the most part, which seemed to skirt around all the current chaos, relatively unscathed. That would be Silicon Valley and all its ancillary provinces aka “Disruptive Tech.”

So far the coveted group known collectively as “FAANG” (e.g., Facebook™, Apple™, Amazon™, Netflix™, Google™) seems to have held the “barbarians at the gates” known as investors relatively at bay, or “stable” in their positions, if you will. What has been, anything but, is their cohort of IPO brethren that were supposed to have joined them.

“The Valley” seems to fit nicely as a moniker for a now self-recognized nation-state, after-all, if you include the market cap of these and a few others (e.g., Tesla™ and more) their combined valuations rival those of sovereign nations.

For all intents and purposes one could say they’re already developing and embracing their own newly formed currency, aka “Bitcoin™.” All that’s needed would seem is proposing a charter, and recognition.

And that’s why it’s all about to burst, in my opinion. All of it. Why?

Just as there are always clues, it’s in the consistency of further developments, along with weighing any prior, coupling them with the current, then trying to extrapolate whether or not they still stand, or are valid. This is the work most people (especially those paraded across the sycophantic mainstream business/financial media) won’t do. And not doing so for many – as of today – will have ramifications, maybe for a lifetime.

So what’s the “Why?” Of course, it’s only my opinion, but I stand behind it more fervently than ever before. And it is this…

“The Valley” (and its entire ancillary complex aka “the disruptor class”) is on the verge of receiving a wake up call, the likes, that may make the dot-com era look relatively “stable” in hindsight.

To use the political as an analogy, let’s just say, I believe the newly formed “nation-state” of FAANG will have much more in common with the turmoil in Brazil, Spain, Venezuela, and a few others in the coming months as it continues to desperately cling to the mythical Utopia of magical creatures known as unicorns, and cash out riches known as IPO’s. That “Utopia” has already been found to be a Potemkin Village made of spreadsheet papier-mâché analysis and valuation metrics, not worth the digital paper they’re written on.

But what has been far more important over the last few years is this:

Every-time a unicorn has rung its IPO bell – it’s been marched subtly off the so-called “trading floor”, directly to the glue factory door, onto another floor, aka the “killing floor.” Where it and its so-called “lucky” IPO debut investors, along with their wallets, met the same fate.

It’s been a “rinse floor and repeat” proposition going now for nearly 3 years. You know what else happened about 3 years ago? Hint: Quantitative Easing (QE) officially ended. I’ll contend that’s causation, not correlation. A very important distinction and difference, along with what it portends going forward. For as I iterated prior – there are always clues.

Back in April of 2015 as the effects of QE3 had yet to be realized (official end was Oct/Nov 2014) “The Valley” was still in complete euphoric mode. It was during this period I penned the following:

If the stresses now rearing their head within the markets continue I’ll make a prediction.

What you’ll not find more of going forward is VC’s strewn across the skies dawning capes and spandex searching through an ever-expanding universe of start-ups to fund. No. What you’ll find is a lot of the once so-called “wonder companies” that were previously funded desperately seeking additional funding of any type possible. Not to expand, or to buy the next greatest “eye balls for dollars model” to compliment their existing “now desperately seeking eyeballs for dollars” model.

What they’ll be in is a frenzy seeking funding – for their very own survival. Because Non-GAAP “We’re killing it!” earnings reports won’t do the most important thing in a recessionary downturn alongside the reality of no more “free” money.

As of that writing there have been far more tales of unicorn woes than anything else. Hint: Snapchat™, Twilio™, Blue Apron™, just for a few recent examples.

Then of course we have the “stable-mates in waiting” decacorns that were supposedly so ready, so fantastic, so disruptive, so _______(fill in the blank) that when they made their procession down to the IPO “floor” everyone would be dazzled.

Of course I’m speaking to Uber™ and such. How’s that all working out? Hint: The valuation was supposedly cut to around somewhere in the $40’s with Softbank™ supposed interest. Yet, that was before the latest fiasco in London was calculated in, or should I say, out? e.g. “Uber London loses license to operate.”

Hmmm, wonder what it’s worth today? I have a feeling nothing with a 4 handle, or even a 3, but that’s just a feeling. But if it stays private? Sky’s the limit when you’re the one doing the valuation metrics, right? Just ask them.

Remember when Snapchat was about to save the IPO world? (and if you’re one of the “lucky” to get in at the IPO, you have my condolences) This was the company that for all intents and purposes was going to show everyone that dared question the power of “The Valley” and their incessant hold to the “It’s different this time” meme that it was they that were in fact “the chosen.”

And they did just that – and were chosen to join the others in the IPO hall-of-shame with no redemption for both their valuation metrics along with many an investors wallet. You don’t hear about investors wallets anymore,but did you hear how “Billionaire Snapchat CEO Evan Spiegel and supermodel Miranda Kerr are a having a baby“? IPO’ing just-in-time does have its advantages, does it not? Again, if you were one of the debut “fortunate”, again, my condolences.

Yet again, Who’da a thunk such a thing even possible when the entire main stream financial media was in near blissful, rapturous fascination with both the product along with its story?

In my opinion: This isn’t a good sign if you’re the supposed “David” in “The Valley’s” version of “Goliath” killers. Especially if you’re simultaneously held to be the IPO savior of tech. And there’s only one thing worse than “expectations” not being met, even if it is hopes, or dreamlike infused wishes.

What’s that you ask? Hint: When you state publicly that your business, a business that is looking to garner other people’s money who will someday be looking for a return on that investment read – they may never find that scenario ever possible.

“We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.”
So, I’m going to ask you a question from a business standpoint: Why in the world would you include such a statement?

Some will argue this was just some boilerplate legal mumbo-jumbo that is constructed and stated in more differing ways than there are ants on the planet, and needs to be included somewhere within the fine print, where all this form of legalese gets inserted to be glossed over. And that would be a fair argument. However, if that’s the reasoning: Why in the world would you make this statement front, center, and unable to miss?

Unless?

When it comes to that “unless” question, there’s only one question I feel answers it. e.g., “Too soon?”

I’ve made a myriad of arguments in articles on basically the same theme over these last few years, and most have fell on deaf ears. Yet, as the “markets” have continually gone higher any coverage for these so-called mythical companies seems to have gone from front-page news to the obituary section, where again, no one wants to read for fear it might be theirs to be read next. Unless they’re having a baby. If then, see above.

Yet, there are glaring signs that should be laid out and parsed for what they may portend in the very near future, coming from what has now been classified as what can only be called the “never gonna let you down” family of all that “The Valley” holds dear. e.g., The FAANG family.

First, there’s Apple. As of now the new phone seems to be a hit. (To be clear, I’m an Apple product fan and user) However, what seems more than troubling is that the entire Apple mystique seems to be not only unraveling, but falling into atrophy.

Differing product rollouts (think wireless ear buds for one), software upgrades that are actually downgrades (as in features once favored by power-users suddenly vanish in their entirety) missed or delayed shipping dates, sufficient product inventories and/or availability., and on, and on. And yet? The CEO, Tim Cook, the once heralded operations aficionado seems to have plenty of time allocated concerning political statements be at the ready for consumption, rather, than all of the Apple products still in limbo. (Think Mac Pro® for another)

There’s just something not right with that entire situation, and I believe there will be backlash to be paid in the coming future. If so. the ripple effects are going to be well felt. However, when it comes to Apple – they run a business that generates net profits, massive at that. If there is any seismic activity in “The Valley”, Apple might not only fair the best, but actually benefit from it. But that’s for another article.

Then there’s Facebook and Google, the ultimate “ads for eyeballs” representatives. Currently their numbers seem to be “hitting it out of the park” as is portrayed ad nauseam via any next-in-rotation fund manager. However, as I’ve opined far too many times to count, I believe that is the result of failing ads-for-eyeballs campaigns concentrating their efforts to the two remaining points, where a return for those ad dollars has even the remotest shot of providing a sale.

If true value and efficiency was the reason for these two entities to receive, now, nearly 2/3rd of all the digital dollars being spent across all of social or digital media. If this were true, it begs the question: Then why are the largest ad buyers in the world for mass marketing products pulling their ads from these venues consistently? Hint: type “ad fraud” into your search engine of choice)

I contend their gains go hand-in-hand at approximately the same rate, as all the competitors lose the equivalent amount.

All one has to do is compare what were supposedly the next “kings” for further “ads for eyeballs” riches losses with these two ever-increasing gains. I content, after this retail season concludes, so to will those gains. And that alone will change everything, and I do mean just that – everything – for these two current FAANG rulers.

Then there’s of course Amazon, Netflix, (and how can one leave out) Tesla. Here’s where one question will become paramount when, or if, things become slippery. That question is: Where’s the money? aka Net profits.

Every time there seems to be a questioning of valuation in any of these companies one thing is for certain: Future Hype makes it appearance, again, and again, and again, and again. Tesla has now made it an art-form. Need proof? Fair enough, to wit:

As Tesla wrangles with production failures and more, suddenly the stock appears vulnerable – then just like magic (or clockwork to be precise, but there’s a mix of both for sure) Mr. Musk dons a stage and venue and rolls out the “next big thing.” This time, its “Semi-trucks, and a new “Roadster.”

All sounds just fantastic, right? Well, it is, what’s even more fantastic will be how Tesla finds the time to do any of it as its current state of affairs in delivering already claimed vehicle production falls further, and further, and further behind schedule. Which begs the question: Does this P.T. Barnum effect begin to wear thin on already promised riches that aren’t showing up? The share price seems to be showing the “effect” is no longer the catalyst to unseen black-sky territory as it once was.

…I cavalierly made the comment that Elon Musk and Jeff Bezos would nod their head in approval. For this has become so blatantly obvious to anyone paying attention, it’s now downright comical.

Why? As I’ve been stating for years – It’s all about how to play the headline reading, algorithmic, front running, HFT, trading bots. Hint: Remember how every time it seemed Amazon™ stock valuation was questioned there was suddenly barrage of “news” about drone deliveries? All coincidence I’m sure. After all it’s not like it worked for the Fed, right?

Now its electric semi trucks, and for Amazon, it’s now about taking over the government procurement supply chain. What’s next rocket ships to Mars? Wait, I’m sorry, I already forgot, that was last cycle. It’s getting harder to keep up.

Silicon Valley and its now representative, amalgamation of companies collectively known as FAANG currently seem invincible to the warnings signs building up all around them. Much like in the early stages of the dot-com era where upending calls for caution were met unheeded, or just-plain-out dismissed with a vengeance.

But that’s the funning thing about reality, especially when the pendulum reaches the final height of its swing. For once it does, it comes back the other way – with a vengeance.

The issue this time is this: On the upstroke was where “cartoon superheroes” and “it’s different this time” magical thinking with childish abandonment was not only rewarded, but seemingly reined supreme. Until…

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Back on October 17th I began openly pointing out what I deemed “warning signs” that were signaling trouble (and by trouble I meant “big trouble”) may be on the horizon for the “markets.” In those observations I used a few charts, patterns, and commentary to describe that if my inkling was correct, than we could/should expect to see certain signals confirming it.

It was only a day later the first made its presence known. Since that point the “market” (once again) seemed to shrug off that signal and propelled higher over the resulting weeks. But a funny thing has happened, more than once, over these ensuing weeks that seems to have added weight to the original “signal”, rather than its usual dismal for relevance. To wit:

The above chart is of the S&P™ as of today at approximately 11:30AM ET using 4hr intervals. What the above chart represents is that since I first made that initial observation, where the first signal occurred (e.g., the first arrow) the “market” has revisited this precise area now three times.

There’s a lot to infer from the above, but too my eye, along with what is currently taking place in regards to the competing tax bills making their way through both chambers, the repercussions for any misgivings similar to what happened with the healthcare debacle are multiplied exponentially. The reason?

The proposed tax bill, and its ultimate passage, is that single “hair” that is holding the “Sword of Damocles” aloft.

Yet, there’s a catch, for it is not truly all about just “passing it.” At least, not as far as the “market” and business leaders are concerned that is.

Passing it is the secondary attribute. What’s in, or not in it, is what’s important. And the more the talking heads on Capital Hill keep talking – the more it sounds like there’s a lot of things not in there that should be, and even more that shouldn’t – that are.

This has the potential, in my opinion, for a very knee-jerk reaction, with very detrimental consequences, should what’s both in, as well as what’s not becomes known. Here’s what I said about this about a week ago, again, to wit:

Then there’s the third, and it is here where everything can go awry: The release of what is, and what is not, in the so-called “Tax Cutting Bill.”

If, and I don’t say this lightly, if the proposed cuts are seen, or show, they’re nothing more than specious talking points? This entire rally since the November election lows is at risk. And by “risk” I mean of falling apart in ways similar to falling off a cliff.

With the healthcare fiasco still fresh in many a mind. If the supposed “tax cutting” resembles anything of the sort as was unveiled during the healthcare debate? All I can say is: look out for what “it’s different this time” can mean in reverse.

Just a reminder of where we are today, as to where we were last November when all of this was supposedly, “A done deal!”

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I was in a meeting the other day made up of C-suite business leaders when I asked the group if there were any further questions. Suddenly, one of them turned to me and asked the following. To wit:

“You said there are times when you’re trying to explain what you’re seeing over the horizon, that you can’t take for granted whether or not they truly understand the viewpoint, because too them, you yourself can appear to be over the horizon. Can you give an example of what you mean by that?”

It was a fair question and thought I’d share it, because the reaction to my answer was both overwhelmingly responsive, as well as brought forth provoking thoughts to their own observations or biases for future business concerns. Here’s a summation on how I replied…

“Everyone is looking out over the horizon, as they say. And in using that metaphor, if you think about it, if you were to travel to that horizon and look out, there would of course then be another horizon. My job, or at least how I see it, is to give, or explain to others, what I see from that further vantage point.

That “view” if you will, is nothing more than my amalgamated viewpoint based upon all my prior acumen in business and life. This, again, using it as a metaphor, usually allows me to venture out both first, and further than most. So, if I see, or surmise something that warrants attention or concern, there’s usually going to be some form of lag time till it gets to where most may finally get a first glimpse. The reasoning being, of course, is I’ve already been over, or to the first horizon.

Yet, also inherent in these observations is that the lag time, if you will, sets up the perfect situation as to discount any, and for some, all warnings. This is just as important to point out as the observation itself. One can disagree with whatever I may or may not propose or surmise, but making sure their doing so for the right reasons is key.

Just like the warning for a potential hurricane brewing in the open ocean. Whether or not it hits landfall with the expected strength or not is immaterial. Knowing it was there, along with its potential is the key, which is where the real question lies and that question is this: Would one rather have a knowing and possibly adjust their plans or actions accordingly, then not have it make landfall? Or, would one rather go about oblivious? The ‘oblivious’ person appears the smarter every time – until the one day they’re blindsided.

Business is much the same, that’s why honing this skill, for lack of a better term, is paramount for those serious about it.

To be clear: It’s the ability (of course as a metaphor) to see over the first horizon onto the second, and make plans accordingly, as to act, move, or stay put is where the real competitive advantage is made. This is the process that delivers ‘First Mover Advantage’ status and all the competitive benefits that come with it.

Many think it’s just plain luck. It’s not. Sometimes things work, sometimes they don’t. However, the conscious decision to place oneself or business directly in the probable path to be at the right place, or the right time, with the right solution, is not luck – its prudent business at the highest level of the game.

Yet, let me reiterate: Inherent in these observations is that lag time. And it is here that sets up the perfect situation as to discount any, and for some, all warnings. It’s how people never see the next big crash, or the next big “thing” as to capitalize on it.

Some think it’s all about the stock market, but it’s not. This applies to markets and businesses such as how “Sony™ never saw the iPod®, or how Motorola™ never saw the iPhone®. The list goes on and on.

Remember, these two examples I use are for the reasoning that the afore-mentioned were not just the dominant players, but for all intents and purposes, created the product categories to begin with. Then, lost not only market share – but total brand and product relevancy – and never regained it.

Today, when it comes to the financial markets, I hear all the time about how the “experts” are predicting this, that, and the other thing, and how this will happen, and that won’t happen, and on, and on. All fair points, if – you don’t remember any of the above I just referenced and apply its lessons to what may play out in likewise manners.

Let me give you another example only I’ll use myself in this one: Back in 2008/09 I was part of a handful, and I mean that literally, that warned that the markets had not only been captured, but were being manipulated by what was then called a conspiracy theorist argument. That argument was that there was some type of hidden-hand coming into the markets and rescuing it every time there was any meaningful sell off. The moniker applied to this was called ‘The Plunge Protection Team.’

This was met with calls from academics, economists, policy makers, fund managers, et al across the media complex as sheer lunacy. Calls of ‘tin-foil-wearing nut jobs’ and more were applied to us. Yet now? It’s all viewed as some form of ‘prudent monetary policy.’

This has completely adulterated the business funding sector providing protection for failing companies while their competitors who should be easily finding funding to overtake them go without. aka Crony-capitalism.

Understanding this one dynamic would have allowed one either to make, or not, certain moves in certain directions either taking additional risks, or avoiding them, because no matter how well they might perform, their funding may not allow them to compete with their competitor who is allowed to remain in business, holding on to their market share bleeding it dry, only for the fact, that their stock symbol has a bull’s-eye deemed worthy by a central bank.

Many businesses are only now understanding this point, because its become so blatant. But I’ve been warning about it and its effects for now going on a decade. We’re all still wondering how, or when this all ends, but I believe to my core it’s the ones that at least understand what’s taking place that have the best chance of not only surviving any market upheaval, but rather, thriving in it.

So then a follow-up question was made, and it was this: “Can you give another example?” Of course, I did. Here’s my answer…

“Currently we are celebrating the 10th anniversary of what we now see as the most revolutionary product of generations: The iPhone®. It’s now ubiquitous in daily life for many, and all ages. It’s seems we’re doing more, and, more, and more with it every day.

However, what if I said to you to contemplate the following: In 10 years from today the smart phone, and the way it’s used currently, may/will be looked upon, or frowned upon, if you will, the same way that smoking and drinking alcohol of the 1950’s is viewed via today’s prism?

Watch any old movie or television program of the ’50’s and so forth. Or, you can use the current Mad Men series on AMC™ as a benchmark. People smoked and drank at their desks. Television hosts and guests openly smoked both on camera, as well as off. For many drinking alcohol or smoking cigarettes, regardless of where one was, was as normal as having a soda today, whatever the time of day.

The smart phone of today is the embodiment of both, in my view. Its usage for distraction and more is getting to the point of where laws are being either enacted or called for. Think texting while driving as just one.

I think this will accelerate from this point on in a very short time from here, because of the things we’re finding out about it as we go along. It’s probably the most habit-forming, time-wasting, attention distraction device we’ve come up with in a century. It’ll probably be said it also promotes tooth decay or some such idiocy to push the narrative for curbing its usage.

I can see ‘age restrictions’ of all types whether for the device itself or content available. Use in classrooms, boardrooms, meetings, and more I can see being socially outlawed in the very near future. Already it’s becoming common to see a sign stating ‘NO CELLPHONE USE ALLOWED’ in certain venues. I am of the opinion this is going to accelerate, not maintain current levels. Which begets the next questions, if this has any validity:

How would your business be impacted – if – that were to be true? What preemptive positioning could you take before hand? What resources would you put or commit into the initial stages? How much commitment would be legitimate? At what point, or what signaling, would warrant an escalation of resources? Or, at what point should the entire notion be jettisoned? And so on, and so on.

And, now since I just brought this notion forward: can you see the possibility of it?

No one knows, today. But being on a careful watch for further clues may put your business in the position to capture or jettison markets in a favorable manner, rather than, suddenly waking up and finding all that great bargaining your people did to clinch the production terms to bring down the cost per unit by a few cents, now means you’re sitting on two warehouses full of the latest version of Walkman’s® as the iPod debuts, because you never saw the potential for upheaval coming. Or worse, payed no attention too it.

One response was:

“I just can’t see that happening, yet, I can see where that could be possible. After-all, no one thought cigarettes would ever be turned into the nasty habit in the publics eye that they are now. And alcohol? Same thing. Even 10 years ago, it wasn’t viewed as it is even today.

I get it now. Doesn’t mean you have certainty, but if you were on the watch for it, as you say, yeah, I can see how one could set oneself up to be in the right business, or get out of the business, at possibly the right time.”

That last line was what the entire example was meant to express. When I heard it, I knew, we were now all on the same page.

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